Latest Results

TyraTech Inc. (AIM: TYR), a leading independent novel pesticide company for human, animal and environmental health, today announces its maiden full year results for the year ended 31 December 2007 and the first since listing in June 2007.

Download
These Results are available in PDF format.
To download please click here

Operational Highlights

Financial Highlights

Commenting on the Group's maiden Full Year Results since Listing, Douglas Armstrong Ph.D., Chief Executive Officer
of TyraTech, said:

"TyraTech had its debut on AIM in June and the Group has made good progress throughout this period. 2008 is going to be an exciting year when we will continue to focus on the Kraft development, plan to create further new partnerships, and launch new products. We also expect this year to have important new value building discovery advances of proprietary active ingredients needed for the delivery of disruptive products for the control of agricultural and animal pests. We have built a strong infrastructure with key team additions bringing industry leading expertise and experience to TyraTech. I am very optimistic about the future and we look forward to creating significant shareholder value as we progress the Group."

 

back to top

Chairman's Statement

TyraTech, which was formed in 2004, develops and commercializes products for the control of invertebrate pests and pathogens using TyraTech's proprietary discovery core technology. This technology provides the Group with a wide variety of product and business opportunities in many markets and geographic regions. The differentiating feature of these products is the potential to have a combined level of potency and safety that other invertebrate control products are unable to offer. Our platform brings many of the principles of drug discovery and development to the fields of insecticides and parasiticides. By targeting specific chemoreceptors that are found in invertebrates but not in humans and animals, TyraTech can produce products that use natural plant derived compounds targeting these receptors to rapidly kill insects and parasites while being environmentally friendly and harmless to humans and animals.

The key elements of the Group's strategy are based on the creation of significant shareholder value through bringing products to market to serve the animal health, human health and the pesticides market via the following routes:

TyraTech's plan for the use of its technology is to develop selected proprietary active ingredients which can then be used across a wide variety of market segments, either by development partners or by TyraTech itself. The work done to date has confirmed the capability of the platform and provided direction for new AI discovery. TyraTech intends to expand and exploit its platform in order to develop new AIs which will create significant additional value in the market with products that materially improve potency while sustaining or improving safety.

TyraTech also has a separate technology with associated intellectual property that is the basis for the Sustainable Solutions business. This technology has been incorporated into specialized dairy farm equipment for processing cattle manure waste to a usable material for cow bedding and plant growing medium. TyraTech's main emphasis will be to further develop the technology, improve the processing equipment, and develop markets for the processed material.

At the end of 2007 we have (US$27.5) million in cash and short term deposits and we will be investing in 2008 to continue to exploit the market opportunities that this exciting technology provides.

 

Geoffrey Vernon
Chairman
April 2, 2008

 

back to top

Chief Executive Officer's Review

Introduction

TyraTech has had a successful year following its debut on the Alternative Investment Market in London. The Group aims to be the recognized commercial leader for revolutionary products that control invertebrate pests and pathogens and have an unsurpassed combination of efficacy and safety for humans, animals and the environment. The Group looks to maximize sustainable growth and value for its shareholders, customers, partners, and employees through the development of quality industry-changing products enabled by our proprietary, targeted, receptor-based screening platform.

TyraTech's Core Technology

TyraTech's founding technology has broad applicability, for human and animal health markets, as well as the control of insects and other agricultural pests. The Group's molecular screening technology is principally based on three specific receptors that are members of the G-coupled protein receptor (GPCR) class and:

TyraTech has focused primarily on certain botanical essential oils which are natural ligands for the targeted receptors and, due to their broad spectrum activity, have an excellent safety profile and can sometimes have a speedier regulatory pathway. However, the receptor-based technology can also be used for the characterization of any chemical (synthetic or natural) to rapidly assess both the binding to receptors and the potency of receptor activation. The biological pathways associated with the receptors also offer a directed way to identify additional active compounds – including other existing pesticides – that may act in a favorable or synergistic fashion with the receptor ligands.

By targeting different modes of action, TyraTech's technology supports the development of a line of products called "TyraTech EXTEND" which are composed of lower concentrations of marketed pesticides combined with TyraTech's natural blends and which demonstrate efficacy at a level equal to that of higher concentrations of these chemicals, with a superior safety profile and more favorable environmental impact. As a result of the different modes of action in the TyraTech EXTEND products, the development of resistance that currently occurs with recurrent use of chemical pesticides is expected to significantly decrease. TyraTech's screening platform can also be used to find other substances, either natural or synthetic chemicals, which dramatically amplify the efficacy of the receptor-activating blends without negatively affecting their safety profile. This is the basis for TyraTech's planned amplified potency (called TyraTech AMP) products and will target compounds that have a directed activity at the biology that results following the receptor activation.

Based on the capabilities of its screening platform, TyraTech is able to further expand the use of this platform to support the development of selective blends that target or spare specific invertebrates. This capability is expected to provide TyraTech products to satisfy unmet need in various commercial applications by decreasing the negative environmental impact of pesticides on beneficial species.

Sustainable Solutions

In addition to its own core technology, TyraTech has proprietary technology which is used in equipment that converts dairy cow manure into a useful growing or potting soil medium and suitable sphagnum peat alternative. A separate division (TyraTech Sustainable Solutions LLC) has been created to sell this equipment to dairy farms in the U.S., purchase the pathogen-free growing medium output at a nominal fee, and resell the manufactured product to either:

TyraTech's Market and Partnering Strategy

The key to TyraTech's success will be the effective development of well-structured channels to market. TyraTech will approach market entry, at least in its early years, primarily through strategic marketing and development partnerships. The rationale behind this is that TyraTech's core technology provides such a large base of products in many diverse market segments that it is impossible for an early stage company to maximize the broad scope of commercial opportunities, particularly in an organized and timely fashion. As a result, strategic partnerships with companies that have a strong global and/or key regional presence will provide its products with the most extensive market coverage at a lower cost and with higher operating margins. However, the Group's opportunity for immediate revenues necessitates identifying alternative routes to market directly to customers or through distribution partners in the short and medium term.

Future Strategy

TyraTech has formed a key strategic partnership with Kraft Foods Inc for the development of a functional food that can aid in the control of human intestinal parasites. This project and relationship is progressing well and together we achieved the first major milestone at the end of 2007. TyraTech's pesticide technology has matured over the past year and now demonstrates an opportunity for broader pest control capabilities. With this progress, we are changing; our strategic partnering approaches are changing to better coordinate bringing a broader array of products to the marketplace. The Group is now in a position to explore strategic development and marketing partnerships that have broader segment opportunity to better leverage our new active ingredient formulations. Our current insecticide relationships with Arysta and Syngenta also progressed this year, successfully achieving target performance and financial milestones. However these relationships are for relatively narrow segments in pest control, namely professional pest control operators, vector control, and limited horticultural applications. Having broader, rather than narrow market rights is also a preferred objective of Arysta and Syngenta. As we are now pursuing these broader market segment partnerships, we expect our current partners will compete along with other pesticide companies as we determine the best partner options for TyraTech, which will likely result in changes in the scope of rights. For example in preparing for this new phase, Syngenta and TyraTech have recently mutually agreed to suspend development activity in the current narrow market segments and to explore the Group's technology for a potentially different relationship with broader and larger market segments. Arysta continues to move forward with the lead TyraTech insecticide products, while discussing new areas of partnership.

Not only are we targeting a revamped partner strategy for the agricultural and horticultural markets, but we expect new relationships in the consumer and professional pest control markets, and in our animal health business. Our shareholders should begin to see the results of these strategic alliance activities this over the coming year.

In the future, the Group will target relationships and license agreements that will be more "product" specific rather than providing the partner with rights to all technology within a market segment. As a result, TyraTech plans to:

In the longer term TyraTech will seek to enter markets with its own products where its core technology can create AIs that have the ability to disrupt market dynamics.

Outlook and Summary

We have had a successful year in the Kraft relationship, achieving the first major milestone, as well as development milestones with Arysta and Syngenta. 2008 promises to be an exciting year with the continued focus on the Kraft development, new partnerships to be created, new products to be released and the continued focus on the development of the technology. To this last point, we believe that the technology platform can serve to generate the market-changing products that we all strive for: products that can control the targeted pests in a way that provides safety to people, animals and the environment. In doing this, the era of toxic chemical pesticides should end; with pesticides that we don't have to be afraid to use, and food crops that won't carry poisons. We have an increasingly strong organization in place to help achieve these ambitious goals and I am optimistic for the future. We look forward to building and returning value to our shareholders and thank them for their support. Finally I would like to thank our employees for the significant effort they have put in, to make this a successful year for the Group.

 

R. Douglas Armstrong, Ph.D.,
Chief Executive Officer
April 2, 2008

 

back to top

Financial Review

Overview

Results for the year to December 31, 2007 show a successful year in achieving key milestones, bringing products to market and investing in key resources. Revenues increased to US$5.5 million from US$(0.3) million and we grew the operating expenses to US$18.9 million from US$7.1 million.

Revenues

The Group achieved major milestones during the year from Kraft and other contract milestones from Arysta and Syngenta resulting in payments of US$5.2 million (2006: US$2.3 million); the amounts recognized for revenue during the year was US$5.6 million (2006: US$0.2 million). In the year ended December 31, 2007, we also released products to the market and we invoiced and recognized US$0.4 million of revenue in new areas. Revenue was offset by an amount relating to the fair value of warrants issued to a commercial partner and treated as a sales incentive of US$(0.5) million (2006: US$(0.5) million).

Cost of Sales and Gross Profit

Cost of sales for the year was US$2.4 million (2006: nil). This related to significant first costs of our "Wastesolver" manure management equipment of US$0.7 million, cost of new insecticide products introduced in the US and India of US$0.1 million, research and development costs related to collaborative revenue projects of US$1.4 million, and an inventory write off from last year of US$0.2 million relating to business that we did not pursue with AgCert International Plc.

Operating Expenses

Overall operating expenses increased to US$18.9 million (2006: US$7.1 million) and include non cash compensation expense relating to founder share grants and options of US$4.0 million (2006: US$0.4 million). The net cash expenditure in operating expenses grew to US$14.9 million (2006: US$6.7 million).

Research and development expenditure increased to US$5.9 million (2006: US$4.5 million) gross and $4.5 million net after allocating $1.4 million (2006: nil) to cost of goods sold, as we increased the number of staff in the department and expanded the work on patent protection. The cash expenditure grew to US$5.3 million (2006: US$4.3 million). General and administrative spending also increased to US$8.1 million from US$1.4 million, reflecting the development of a management team and supply chain organization. The cash expenditure grew to US$6.0 million (2006: US$1.3 million). Business Development expenditure also grew to US$6.2 million (2006: US$1.2 million) as the Group recruited business development and sales and marketing teams to take the Group's technology to market. The cash expenditure grew to US$4.9 million (2006: US$1.1 million)

Other Income and Costs

Finance income increased to US$0.8 million (2006: nil) earned from the funds raised from the listing on June 1, 2007. Part of the proceeds was used to pay of all the outstanding debt to XL TechGroup Inc to which the interest expense of US$1.0 million (2006: US$1.6 million) relates.

Changes in the fair value of warrants amounted to US$(11) thousand (2006 US$2.2 million) and relates to warrants issued to the underwriters of the IPO. The charge in 2006 of US$2.2 million is for warrants issued to XLTechGroup, Inc.

An arrangement to accelerate payment of the Vanderbilt University licensing agreement resulted in a US$518 thousand loss on extinguishment of the discounted Vanderbilt license liability. Payment of the liability was made through a combination of cash (US$0.5 million) and 65,457 shares of TyraTech, Inc. common stock valued at US$651,000.

Results before and after tax for the year were a loss of US$16.5 million compared to a loss before and after tax of US$11.2 million in the previous year.

Balance Sheet

Non-current assets increased to US$1.3 million (2006: US$0.7 million) as a result of the fit out of new offices and laboratories to accommodate the expansion of staff and the upgrade of our information technology infrastructure and new ERP systems. Current assets show a significant increase to US$29.1 million (2006: US$2.1 million). Cash and cash equivalents were US$27.5 million (2006: 1.7 million) as a result of the fundraising completed June 1, 2007, while trade and other receivables increased to US$0.5 million (2006: US$0.2 million). Inventories grew to US$0.8 million (2006: US$0.2 million) with a build of materials to support the growth in revenues for 2008. Prepayments and short term deposits grew to US$0.3 million (2006: US$0.0 million) due to the separation of operations from XLTechGroup, Inc.

Total liabilities decreased to US$6.4 million (2006: US$14.8 million). The Group has no debt at the end of 2007, part of the proceeds from the IPO were used to pay down the debt of US$6.0 million payable to XLTechGroup, Inc. at the end of 2006. The accounts payable and accrued liabilities have grown to US$3.8 million (2006: US$1.9 million) with the increase in the size of the Group's operations. The deferred revenue has reduced by a small amount to US$1.6 million (2006 US$2.2 million) due to the timing and size of milestone payments and when they are recognized as revenue. The deferred revenue outstanding at the end of 2007 is expected to be recorded as revenue during the first half of 2008 as costs are incurred on collaborative research and development activities. The warrant liability at the end of 2007 of US$1.0 million, which will not be settled in cash, relates to warrants issued to the underwriters of the IPO. The warrant liability at the end of 2006 of US$4.6 million was for warrants issued to XLTechGroup, Inc., which were reclassified to equity upon completion of the IPO.

During the year TyraTech LLC a Delaware LLC was merged with and into TyraTech Inc, a company formed on April 27, 2007 as a Delaware Corporation. The existing members of TyraTech LLC received 16,934,565 common shares in TyraTech Inc. A further 5,000,000 shares were issued with the admission of the Group to trading on the AIM market of the London Stock Exchange for cash net proceeds of US$43.7 million. At that time 65,457 common shares were issued to Vanderbilt University in conjunction with a cash payment for the assignment of outright ownership to the Group of certain patents and patent applications. Further warrants for 198,002 common shares were granted to the Group's advisers on admission of the shares to the AIM exchange. During the year the Group acquired 129,121 treasury shares under the terms of a buy back agreement with an employee who had retired.

Liquidity and Cash Flow

Net loss before and after tax for the year was US$16.5 million (2006: US$11.2 million) including non-cash expenses such as amortization of employee stock awards of US$4.0 million (2006: US$0.4 million), depreciation and amortization of US$0.9 million (2006: US$1.4 million) and warrants issued and changes in the value of existing warrants of US$0.5 million (2006: US$2.7 million). The increased operational activity including sales and product development has increased accounts receivable, prepaid expenses and inventory by US$1.5 million (2006: US$0.3 million), this is offset by an increase in payables and accruals of US$2.5 million (2006: US$1.0 million). All this together has resulted in a net cash outflow from operating activities in the year of US$10.3 million (2006: US$3.8 million).

Cash invested in property, plant and equipment increased to US$0.9 million (2006: US$0.6 million). This was largely for the fit out of new offices and laboratories to accommodate the expansion of staff and the upgrade of our information technology infrastructure and new ERP systems.

As noted above, during the year the Group issued 5,000,000 shares with the admission of the Group to trading on the AIM market of the London Stock Exchange, for net proceeds of $43.7 million. Part of the proceeds from the issue was used to repay the notes payable to XL TechGroup, Inc.

Cash and cash equivalents were US$27.5 million (2006: US$1.7 million). We invest our cash resources in deposits with banks with the highest credit ratings, putting security before absolute levels of return.

Currency Effects

The Group has no significant overseas currency exposures and does not use financial derivatives to manage currency risk.

 

Keith Bigsby
Chief Financial Officer
April 2, 2008

 

back to top

Consolidated Balance Sheets
December 31, 2007 and 2006


Assets   2007   2006
Current assets:        
Cash and cash equivalents $ 27,521,625   1,656,666
Accounts receivable   485,590   194,496
Inventory   765,107   219,180
Prepaid expenses   283,028   19,996
Total current assets   29,055,350   2,090,338
Property and equipment, net of accumulated depreciation   1,329,563   705,089
Total assets $ 30,384,913   2,795,427
Liabilities and Shareholders' Equity (Deficit)        
Current liabilities:        
  Accounts payable $ 573,100   132,435
  Accrued liabilities   2,830,017   868,067
  Accrued license fees   -   501,780
  Due to affiliate   401,852   340,702
  Deferred revenue   1,605,666   2,187,062
  Current installments of obligation under capital lease   18,462   16,758
  Notes payable to affiliate   -   6,019,578
  Liability for warrants   997,930   4,655,345
  Total current liabilities   6,427,027   14,721,727
Capital lease obligation, excluding current installments   36,940   55,402
  Total liabilities   6,463,967   14,777,129
           
  Common stock, $0.001 par, Authorized and issued 22 million        
  in 2007 (16 million in 2006)   22,000   16,256
  Additional paid-in capital   55,818,617   3,383,194
  Retained deficit   (31,919,006)   (15,381,152)
  Tresury stock   (665)   -
Shareholders' equity   23,920,946   (11,981,702)
Total liabilities and shareholders' equity (deficit) $ 30,384,913   2,795,427

See accompanying notes to consolidated financial statements.

 

back to top

Consolidated Statements of Operations
December 31, 2007 and 2006


    2007   2006
Revenues:        
Product sales   404,979   - 
  License and royalty revenue   100,000   150,000
  Collaborative revenue   5,525,037   80,834
    Gross revenues   6,030,016   230,834
  Contra-revenues from sales incentives provided in warrants   (482,919)   (495,889)
    Net revenue   5,547,097   (265,055)
Costs and expenses related to product sales and collaborative revenue   2,439,558   -
         
Gross profit (loss)   3,107,539   265,055
Costs and expenses:        
  General and administrative   8,139,193   1,366,789
  Business development   6,206,324   1,231,322
  Research and technical development   4,517,300   4,505,042
    Total costs and expenses   18,862,817   7,103,153
  Loss from operations   (15,755,278)   (7,368,208)
Other (income) expense:        
  Interest income   (758,004)   -
  Interest expense   1,032,859   1,593,908
  Change in fair value of warrant liabilities   (10,971)   2,228,646
  Loss on extinguishment of liability   518,692   -
    Total other expense   782,576   3,822,554
    Loss before income taxes   (16,537,854)   (11,190,762)
Income taxes   -   -
  Net loss $ (16,537,854)   (11,190,762)
Net loss per common share:        
  Basic and diluted $ (0.84)   (0.69)
Weighted average number of common shares:        
  Basic and diluted   19,756,955   16,195,975

See accompanying notes to consolidated financial statements.

 

back to top

Consolidated Statements of Shareholders' Equity (Deficit)
Years ended December 31, 2007 and 2006


          Additional           Total
      Common   paid-in   Retimed   Treasury   stockholders'
      stock   capital   earnings   stock   equity
Balances as of December 31, 2005 $ 15,159   2,987,077   (4,190,390)   -   (1,188,154)
  Stock based compensation   1,097   396,117   -   -   397,214
  Net loss   -   -   (11,190,762)   -   (11,190,762)
Balances as of December 31, 2006   16,256   3,383,194   (15,381,152)   -   (11,981,702)
  Issuance of shares to settle license                    
  liability   65   650,935   -   -   651,000
  Issuance of shares, net of offering                    
  costs of $7,266,519 of which                    
  $1,390,556 represent non-cash                    
  warrants issued to underwriters   5,000   42,292,805   -   -   42,297,805
  Reclassification of warrants from                    
  liability to equity   -   5,037,000   -   -   5,037,000
  Issuance of warrants   -   482,919   -   -   482,919
  Purchase of treasury stock   -   -   -   (665)   (665)
  Stock based compensation   679   3,971,764   -   -   3,972,443
  Net loss   -   -   (16,537,854)   -   (16,537,854)
Balances as of December 31, 2007 $ 22,000   55,818,617   (31,919,006)   (665)   23,920,946

See accompanying notes to consolidated financial statements.

 

back to top

Consolidated Statements of Cash Flows
December 31, 2007 and 2006


    2007   2006
Cash flows from operating activities:        
Net loss $ (16,537,854)   (11,190,762)
Adjustments to reconcile net loss to net cash used in        
operating activities:        
  Depreciation and amortization   870,931   1,356,026
  Exclusivity fees   -   (70,834)
  Write-off of inventory   219,180   -
  License maintenance fee   100,528   116,363
  Change in fair value of warrants   471,948   2,724,535
  Amortization of stock awards   3,972,443   397,214
  Loss on extinguishment of liability   518,692   -
  Changes in operating assets and liabilities:        
    Accounts receivable   (448,990)   (36,600)
    Inventory   (765,107)   (219,180)
    Prepaid expenses   (263,032)   (19,996)
Accounts payable and accrued liabilities   2,402,615   810,126
Accrued license fee   (470,000)   -
Deferred revenue   (423,500)   2,100,000
Due to affiliate   61,150   219,406
Net cash used for operating activities   (10,290,996)   (3,813,702)
Cash flows used for investing activities:        
  Purchases of property and equipment   (851,802)   (618,301)
Net cash (used) for investing activities   (851,802)   (618,301)
Cash flows from financing activities:        
  Net (payments) borrowings on notes payable to affiliate   (6,663,181)   6,062,002
  Payments made under capital lease   (16,758)   (3,942)
  Net proceeds from sale of common stock   43,688,361   -
  Treasury stock purchase from employee   (665)   -
Net cash provided by financing activities   37,007,757   6,058,060
Net increase in cash   25,864,959   1,626,057
Cash, beginning of year   1,656,666   30,609
Cash, end of year $ 27,521,625   1,656,666
Supplemental disclosures:        
  Cash paid for interest $ 1,032,859   266,860
  Cash paid for income taxes $ -   -

 

back to top

Consolidated Statements of Cash Flows (continued)
December 31, 2007 and 2006


    2007     2006
Noncash investing and financing activities:        
The Company incurred a capital lease obligation that was        
capitalized to property and equipment $ -   76,102
The Company issued warrants to acquire its common        
shares in connection with financing obtained, which        
was recorded as discount to debt and a        
noncash warrant liability   -   1,930,810
The Company issued shares in connection with the        
settlement of a license liability   651,000   -
The Company issued warrants in connection with a        
research and development agreement   482,919   -
The Company recorded a receivable and defense        
revenue related transaction with a related party   -   157,896
The Company recorded and subsequently wrote-off a        
revenue related transaction with an affiliate   157,896   -
The Company reclassified warrants issued to a vendor        
and an affiliate to equity   5,037,000   -
The Company issued warrants in satisfaction of        
costs incurred to advisors   1,390,556   -

See accompanying notes to consolidated financial statements.

 

back to top

Notes


The notes to the results are available in the PDF download.

 

Page last up-dated: 2 April 2008

 

Disclaimer for U.S. Site Visitors

This web site contains investor-related information which is restricted to non-U.S. persons or Qualified Institutional Buyers as defined in Rule 144A of the U.S. Securities Act of 1933, as amended (the "Securities Act"). The information provided herein is not an offer to buy or sell, or a solicitation of an offer to buy or sell, any TyraTech, Inc. securities. By viewing pages on this web site, you agree and acknowledge that TyraTech, Inc.'s common stock has not been registered under the Securities Act and that you are a non-U.S. person, Qualified Institutional Buyer as defined in Rule 144A of the Securities Act., or you are not holding, acquiring or selling TyraTech, Inc. common stock for the account or benefit of any U.S. person.